Putin’s Rambling State of the Nation Speech Unnerves Russia’s Elites

Pavel Golovkin—APRussian President Vladimir Putin gives his annual state of the nation address in the Kremlin in Moscow on Dec. 4, 2014.

The euphoria among the Kremlin elites that followed the annexation of Crimea has faded as economic and security issues pile up

Vladimir Putin’s state of the nation address on Thursday looked at first like a flashback to the not-so-distant past. It was held in St. George’s Hall, the same ornate room in the Kremlin where the Russian President announced his decision in March to annex the region of Crimea. The same honor guard opened the gilded doors when it came time for the President to enter, and Putin sprung into the hall with his usual strut, at once cocky and contained, like a boxer trotting into the ring. He also surprised exactly no one by repeating his hackneyed slogans of defiance toward the West: “It is pointless trying to talk to Russia from a position of strength,” he declared. And later on: “No one can gain military superiority over Russia!”

But there was one big difference: the reaction. The audience’s composition was the same as before, the rows packed with the same sycophantic lawmakers, technocrats, and propagandists who attended Putin’s blistering Crimea speech on March 18. But the applause Putin received this time was a lot more muted. Not a single standing ovation interrupted him, and even the most crowd-pleasing quips – “Our army,” Putin said, “is polite but terrifying” – hardly got more than a chuckle and a golf clap.

It’s not hard to see why. On the eve of Putin’s big speech, the problem of violent separatism sprung up again on Russia’s southern flank, a security issue far more immediate and close to home than the military threat emanating from Ukraine. On Wednesday night, a group of at least ten gunmen in the region of Chechnya sparked a massive shootout and manhunt in the regional capital of Grozny, reportedly leaving at least ten police officers dead before sealing themselves off in a school and the local House of Press with caches of explosives. Only on Thursday morning, a couple of hours before Putin’s address, did the national anti-terrorism committee announced that it had “liquidated” all the terrorists. “Street battle in Grozny,” remarked Carl Bildt, Sweden’s ex-Minister of Foreign Affairs and a vocal critic of the Kremlin. “Moscow should have more pressing priorities than destabilising Ukraine,” he tweeted on Thursday.

But the trouble at the top of most people’s minds in Moscow was not the one beamed in from Chechnya by the television news. It was the one afflicting the savings accounts and travel plans of millions of regular Russians. The national currency, the ruble, has lost about 40% of its value against the dollar since Putin’s annexation of Crimea, and that has made it a lot harder for Russians to afford the foreign holidays and Western goods they love. Apple, for instance, hiked prices for its iPhone by up to 25% this week to make up for the ruble’s drop in value, as did IKEA for the furniture sold at its Russian locations.

Putin’s attempts to address these issues, however, did little to ease the tension on the faces of his audience. For one thing, he suggested that the ruble’s record-low value is the fault of mysterious “currency speculators,” rather than what everyone knows is really to blame – the Western sanctions launched by the U.S. and the EU after the annexation of Crimea, multiplied by the five-months long plunge in the price of oil, Russia’s biggest export. To repair the economic slide, he ordered the Russian Central Bank and other watchdogs to track down speculators and make them stop messing with the ruble. “The authorities know who these speculators are,” Putin claimed. “And we have instruments to influence them.” On hearing this, Central Bank Chairwoman Elvira Nabiullina, a celebrated economist, bowed her head and appeared to wince. Across the hall, Finance Minister Anton Siluanov, who sat bold upright at the edge of his seat, continued to compulsively bite his lower lip as Putin laid out his economic roadmap.

It soon became clear that Putin did not have much of a roadmap at all. His idea for coping with the isolation from the West, and for dealing with the recession that is almost certain to hit next year, revolved around the adage of “import replacement,” which would see Russia break its dependence on foreign technology, food and consumer goods by producing everything it needed at home. “We have to break our critical dependence on foreign technology and industrial products,” he said.

But in the near term, that’s just not possible, according to Sergei Aleksashenko, a prominent economist and former deputy chairman of the Russian Central Bank, because Russia has never produced a lot of the technology that its modern industries need to function. “It even seemed like Putin took to the podium not because he had something important to say, but only because he was constitutionally obligated to do so,” Aleksashenko wrote in an analysis of the President’s speech. “The superficial analysis of the situation reflected a disconnect with real life, an ‘alternate reality,’ in which the Kremlin now seems to live.”

More perhaps than the sanctions themselves, Putin’s lack of a practical vision in trying to solve Russia’s economic troubles has unnerved the establishment in Moscow in the last few weeks. “The business elite, people close to Putin, there’s a nervousness that we haven’t had for a long time,” says Michael McFaul, the former U.S. ambassador to Moscow who now studies Russia as a Senior Fellow at the Hoover Institution at Stanford University. “I don’t know if that’s overreaction, but it feels palpable to me from people I know. They used to be very cocky. They used to have a lot of bravado, and I don’t see that anymore,” he says by phone from California.

There was not much bravado on show as the officials filed out of the hall on Thursday following their President’s speech. Making their way passed the Kremlin’s throne room and toward the stairs, they were pursued by TV crews demanding information about the slump in the ruble. “If you knew there are speculators why didn’t you take some action to stop them months ago,” a correspondent for state-run Channel One demanded of every official he could get in front of the camera.

Some of Putin’s closest allies did put on a brave face, but they appeared to lack the defiant confidence they exuded after gaining control of Crimea. Sergei Glazev, the Kremlin’s point man on Ukraine and a key economic adviser, dismissed the apparent lack of enthusiasm for Putin’s speech this time around.

“Applause is a subjective measure,” he told TIME as he retrieved his fur hat from the cloakroom.”Besides, you can’t compare the situation now with what it was after Crimea.” Indeed, those nine months have dampened not just Russia’s enthusiasm, but its president’s aura of defiant invincibility.

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